Making your Metrics Work for You, Not Against You
Fulcrum LabsHave you ever heard the saying: “You are what you practice most?”
We see this in our lives everyday, right?
If you practice getting up early every morning, you’ll become an early bird.
If you exercise and eat well, you’ll be healthy.
But what happens when the practice is conflated with metrics? Take the health example above – what happens when the practice becomes less about living a healthy life and more about obtaining a specific weight or caloric intake? Focusing on these metrics – practicing them – can lead to choices and behaviors that ultimately undermine the goal of health.
Conflating Metrics and Strategy
The idea of focusing too much on the metrics that define a strategy is the subject of a new article in HBR, “Don’t Let Metrics Undermine Your Business”. It turns out that, just as in our personal lives, our companies are what they practice most too. And when companies focus their efforts and practices on the metrics that define the strategy – rather than the strategy itself – they start to run into trouble.
“Here’s a common scenario: A company selects ‘delighting the customer’ as a strategic objective and decides to track progress on it using customer survey scores. The surveys do tell managers something about how well the firm is pleasing customers, but somehow employees start thinking the strategy is to maximize survey scores, rather than to deliver a great customer experience.” – HBR
You can see how this might play out. Employees might ask customers to fill out surveys and give them a good score – thus inflating the real service rating. They might even send out emails or text reminders to complete a survey, which would surely negatively affect “customer delight”. But in the pursuit of the almighty metric, these tactics make sense (even if they run counter to the overarching strategy of “delighting the customer”).
Surrogation
The tendency to mentally replace strategy with metrics—called surrogation—is quite pervasive. In fact, research tells us that whenever metrics are present, people tend to surrogate. And it can destroy company value. (It’s worth reading the whole HBR article to get a deeper look at surrogation in action with banking giant, Wells Fargo.)
Metrics aren’t all bad. They give us a sense of direction and provide us insight into how we’re doing – if we’re on the path to success or not. But they can get us twisted:
“…unless the inherent distortions of metrics are understood, they can be dangerous—and the distortions can be amplified precisely because the flawed metrics coordinate behaviors.” – HBR
Solving Surrogation
According to the article, are three ways that companies can guard against surrogation:
1. Get the people responsible for implementing strategy to help formulate it
Strategy, by its very nature, is abstract. And simply talking it won’t do. Rather, organizations need to enlist the help of those who will be responsible for implementing the strategy to participate in its development and in creating the metrics that will be real, solid indicators of success.
2. Loosen the link between metrics and incentives
When pay or other forms of compensation are tied to performance metrics, there is an increased chance of surrogation. People become incentivized to meet a metric, rather than fulfill a strategy. Decoupling, as much as possible, performance metrics from compensation is another way to reduce the risks of surrogation.
3. Use multiple metrics
Researchers have found that people surrogate less when they’re compensated for meeting targets on multiple metrics of a strategy rather than just one.
“This approach highlights the fact that no single metric completely captures the strategy, which makes people more likely to consciously reject substituting it for the strategy.” – HBR
We’d like to add a fourth to this list:
4. Leveraging training to practice strategy and predict performance
One of the most effective ways that we believe companies can guard against surrogation is to effectively train their employees on what the strategy is and what proper achievement of goals looks like. This training includes practicing the strategy in real-job scenarios. For example, our Adaptive 3.0 learning platform is built to give employees lots of opportunities to practice and build mastery and gain confidence. This means that they can practice how their company’s strategy might manifest in real life within a safe training environment.
Companies also need help predicting which employees are likely to apply the strategy correctly and which need more help understanding how to implement it. Training can help here too. For example, our platform’s data-science based analytics give companies predictive insights into which employees are most likely to apply the trained strategy accurately, and which need some more coaching (with either self-remediation in the platform via the Pathway to Mastery tool and/or external coaching).
If companies are what they practice, let’s make sure it’s not surrogration. The intentions that we set matter, and how we share those intentions and equip employees to deliver against them is key to long-term success. Training – especially Adaptive Learning 3.0 – can be an effective tool in the fight against surrogation.
We’d love to chat with you about your corporate strategy – how you’re training against it and measuring it – and how Fulcrum might offer you more insights into the performance of your workforce. Let’s connect.
